Do You Believe in the Growth Potential of Cloudflare (NET)?

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10 hours ago

Fidelity Investments, an investment management company, recently released its 'Fidelity Growth Strategies Fund' first quarter 2025 investor letter. A copy of the letter can be downloaded here. The Fidelity Growth Strategies Fund is a diversified domestic equity strategy with a focus on mid-cap growth investments. The fund focuses on investing in high-quality companies that demonstrate consistent growth and generate positive free cash flow. The fund's Retail Class shares returned -8.03% in the first quarter, underperforming the -7.12% return of the benchmark Russell Midcap Growth Index. U.S. mid-cap growth stocks rose in January but then fell in February and March as post-election optimism was replaced by concern over executive actions, government disruptions, and rising uncertainty about trade and tariffs. In addition, you can check the fund's top 5 holdings to know its best picks in 2025.
In its first-quarter 2025 investor letter, Fidelity Growth Strategies Fund highlighted stocks such as Cloudflare, Inc. (NYSE:NET). Cloudflare, Inc. (NYSE:NET) is a cloud services provider that delivers a range of services to businesses worldwide. The one-month return of Cloudflare, Inc. (NYSE:NET) was 8.61%, and its shares gained 119.61% of their value over the last 52 weeks. On July 2, 2025, Cloudflare, Inc. (NYSE:NET) stock closed at $185.64 per share with a market capitalization of $64.345 billion.
Fidelity Growth Strategies Fund stated the following regarding Cloudflare, Inc. (NYSE:NET) in its Q1 2025 investor letter:
"Untimely positioning in Cloudflare, Inc. (NYSE:NET) (-18%), a provider of cloud-based services to websites – including performance, reliability and security services – also hurt. The stock was added to the portfolio in January when it was on the rise, but after peaking in mid-February the shares retrenched following President Trump's announcement of a steep new tariff on foreign-sourced semiconductors. If eventually adopted, the tariff could notably increase Cloudflare's costs. Questions around the firm's liability for the content that passes through its infrastructure tools also weighed on the stock during the quarter. Despite the valuation pullback, we believe the company still has good growth potential."
Cloudflare, Inc. (NYSE:NET) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 65 hedge fund portfolios held Cloudflare, Inc. (NYSE:NET) at the end of the first quarter, which was 55 in the previous quarter. Cloudflare, Inc.'s (NYSE:NET) revenue for the first quarter increased 27% year-over-year to $479.1 million. While we acknowledge the potential of Cloudflare, Inc. (NYSE:NET) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.
In another article, we covered Cloudflare, Inc. (NYSE:NET) and shared the list of best software infrastructure stocks to invest in. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors. While we acknowledge the potential of NET as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.